In answering that, I might struggle with the convener’s steer to be brief.
The 2009 act established two primary mechanisms by which what are termed carbon units can be used in emissions accounting. Carbon units are internationally recognised carbon credits that can be bought or sold. They represent a degree of recognised confidence that some action will be undertaken somewhere to reduce emissions by a specified amount.
The 2009 act provides for two mechanisms by which carbon units can be used to contribute towards meeting the targets for Scotland, the first of which is an adjustment to reflect the operation of the EU emissions trading scheme in Scotland. That happens automatically every year under the current carbon accounting system. The EU ETS operates in Scotland. Companies are the actors in that scheme, under which they report their emissions and, if necessary, buy permits. At the end of each year, an adjustment is applied to Scottish emissions to reflect the operation of the scheme.
The second mechanism is more intuitively clear. It relates to the possibility that the Scottish ministers may purchase international carbon units as a way of offsetting Scotland’s total emissions. Under the 2009 act, that mechanism is subject to two limits.
The first is the domestic effort target, which, in effect, means that no more than 20 per cent of the year-on-year reduction in emissions can be met through the purchase of credits by ministers. Secondly, ministers have to set recurrently absolute limits on the maximum amount for which they can use purchased units for a period in advance, which roll forwards by five years each time—it is one of the many five-yearly targets.
To come to your question, the bill would change carbon accounting in two main ways, both of which are intended to improve transparency and simplicity, and would affect both of the existing mechanisms. First, the adjustment that reflects the operation of the EU ETS would be removed and emissions would be reported on the basis of Scottish emissions from all sectors of the economy.
The second change would be that, although the option for ministers to use purchased credits would be retained, a new default limit of zero use of such credits would be established. That would effectively provide a stricter limit than the existing measures. The change reflects this Government’s clear commitment not to use purchased credits as a way of meeting targets. That commitment was set out in the recent climate change plan and will apply until at least 2032.
The bill would establish a statutory limit of zero by default. The power would exist to allow that limit to be raised, if future ministers wanted to do that and Parliament agreed to do so through secondary legislation.
That takes us to the final part of your question, which is about the 20 per cent limit. If the limit on the purchase of carbon units were to be raised from zero, it could be raised only up to 20 per cent of the year-on-year reduction in emissions. How would that figure be calculated? Under the bill, all the annual targets for all future years would be known, which would allow you to work out the year-on-year reduction in emissions that would be required. You take the difference and multiply it by 20 per cent to give the maximum amount of credits that could be used in that given year.
Why a target of 20 per cent rather than 30 or 10 per cent? The level of the current domestic effort target under the 2009 act is set at 20 per cent. In a sense, the new limit provision of a default of zero but up to 20 per cent, if that is desired at some future point, would replace the domestic effort target from the 2009 act and means that the domestic effort target as it stands could not be missed in the future, because the most that could ever be purchased would be 20 per cent. Therefore, by way of rationalisation, the domestic effort target has been removed throughout the bill.